TRANSFORMING URBAN AREAS

Transcription

1 PROPERTY DIVISION TRANSFORMING URBAN AREAS Swire Properties growing portfolio of offices, retail space and hotels is continuing to transform urban areas.

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3 18 OVERVIEW OF THE BUSINESS Swire Properties is a leading developer, owner and operator of mixed-use, principally commercial properties in and Mainland China, with a record of creating long-term value by transforming urban areas. Swire Properties business comprises three main areas: Property Investment Swire Properties property investment portfolio in comprises office and retail premises in prime locations, serviced apartments and other luxury residential accommodation. The completed portfolio in totals 13.5 million square feet of gross floor area. In Mainland China, Swire Properties has interests in major commercial mixeduse developments in Guangzhou, Beijing, Shanghai and Chengdu, which will total 8.9 million square feet on completion. Of this, 7.0 million square feet has already been completed. In the USA, Swire Properties is the primary developer undertaking a mixed-use commercial development at Brickell City Centre in Miami, Florida. On completion after two phases of development, Brickell City Centre is expected to comprise approximately 4.0 million square feet (6.4 million square feet including car park and circulation areas). Swire Properties was responsible for the redevelopment of OPUS HONG KONG at 53 Stubbs Road, which is owned by Swire Pacific, and is responsible for the leasing and management of the property. Hotel Investment Swire Properties wholly-owns and manages, through Swire Hotels, two hotels in, The Upper House at Pacific Place and EAST, at Taikoo Shing. Swire Properties has a 20% interest in each of the JW Marriott, Conrad and Island Shangri-La hotels at Pacific Place and in the Novotel Citygate in Tung Chung. In Mainland China, Swire Hotels manages two hotels, The Opposite House at Taikoo Li Sanlitun in Beijing, which is wholly-owned by Swire Properties, and EAST at INDIGO, Beijing, in which Swire Properties owns a 50% interest. At TaiKoo Hui in Guangzhou, Swire Properties owns a 97% interest in the Mandarin Oriental. In the UK, Swire Properties whollyowns four hotels, in Cheltenham, Bristol, Brighton and Exeter. In the USA, Swire Properties owns a 75% interest in the Mandarin Oriental in Miami. Property Trading Swire Properties trading portfolio comprises three luxury residential projects under development in Hong Kong (two on Island and one on Lantau Island), two residential towers under development at the Brickell City Centre development in Miami, a completed office property (Pinnacle One) at the Daci Temple project in Chengdu and the remaining units at completed residential developments. These completed developments include the ARGENTA, AZURA, DUNBAR PLACE and MOUNT PARKER RESIDENCES developments in. There are also land banks in Miami and Fort Lauderdale in Florida in the USA. Swire Properties is listed on The Stock Exchange of Limited. Particulars of the Group s key properties are set out on pages 235 to 243.

4 SWIRE PACIFIC 2014 ANNUAL REPORT 19 Principal Property Investment Portfolio - Gross Floor Area ( 000 Square Feet) At 31st December At 31st December Location Office Retail Hotels Residential Under Planning Total Total Completed Pacific Place 2, ,836 3,836 Taikoo Place 5,451* ,526 5,257 Cityplaza 1,633 1, ,938 2,938 Others ,152 1,163 9,680 2, ,452 13,194 Taikoo Li Sanlitun 1, ,465 1,465 TaiKoo Hui 1,732 1, ,841 3,841 INDIGO Daci Temple Others Mainland China 2,030 3, ,957 6,344 USA UK Total completed 11,710 6,379 2, ,876 20,005 Under and pending development 1, ,858 1,722 Mainland China ,896 2,454 USA ,300 2,377 2,452 Total 14,662 7,408 2, ,392 27,007 26,633 Gross floor area represents 100% of space owned by Group companies and the division s attributable share of space owned by joint venture and associated companies. A schedule of the principal properties of the Group and its joint venture and associated companies is given on pages 235 to 243. The table above does not reflect changes in gross floor area consequent upon the acquisition by Swire Properties of the Government s interest in Cornwall House, which is expected to be completed by 30th December * Includes 894,000 square feet at two techno-centres (Warwick House and Cornwall House). STRATEGY The strategic objective of Swire Properties (as a listed company in its own right) is sustainable growth in shareholder value over the long term as a leading developer, owner and operator of principally mixed-use commercial properties in and Mainland China. The strategies employed in order to achieve this objective are these: The creation of long-term value through conceiving, designing, developing, owning and managing transformational mixed-use and other projects in urban areas. Maximisation of the earnings and value of its completed properties through active asset management, including reinforcing its assets through enhancement, redevelopment and new additions. Continuing to expand its luxury residential property activities. Remaining focused principally on and Mainland China. Conservative management of its capital base.

5 PERFORMANCE REVIEW AND OUTLOOK PROPERTY DIVISION 2014 PERFORMANCE Financial Highlights HK$M HK$M Revenue Gross rental income derived from Office 5,707 5,386 Retail 4,260 3,961 Residential Other revenue * Property investment 10,456 9,786 Property trading 3,842 2,207 Hotels 1, Total revenue 15,387 12,935 Operating profit/(loss) derived from Property investment 7,870 7,309 Valuation gains on investment properties 1,942 6,141 Property trading 1,180 1,035 Hotels (22) (65) Total operating profit 10,970 14,420 Share of post-tax profits from joint venture and associated companies 1, Attributable profit 9,495 12,448 Swire Pacific share of attributable profit 7,786 10,207 * Other revenue is mainly estate management fees. Sustainable Development Highlights Energy intensity (kwh per sqm) LTIR Note: Energy intensity disclosed above relates to investment properties in and Mainland China. Energy intensity includes electricity consumed in the common areas of buildings and by building air conditioning systems. It generally excludes electricity consumed by tenants through their own connections to the electricity grid. Reconciliation of Attributable to Underlying Profit Additional information is provided below to reconcile reported and underlying profit attributable to shareholders. These reconciling items principally adjust for net revaluation movements on investment properties and the associated deferred tax in Mainland China and for other deferred tax provisions in relation to investment properties Note HK$M HK$M Reported attributable profit 9,495 12,448 Adjustments in respect of investment properties: Revaluation of investment properties (a) (3,134) (6,946) Deferred tax on investment properties (b) Realised profit on sale of investment properties (c) Depreciation of investment properties occupied by the Group (d) Non-controlling interests share of revaluation movements less deferred tax 1 19 Underlying attributable profit 7,124 6,208 Swire Pacific share of underlying attributable profit 5,841 5,091 Notes: (a) This represents the Group s net revaluation movements and the Group s share of net revaluation movements of joint venture and associated companies. (b) This represents deferred tax movements on the Group s investment properties and the Group s share of deferred tax movements on investment properties held by joint venture and associated companies. These comprise deferred tax on revaluation movements on investment properties in Mainland China and deferred tax provisions made in respect of investment properties held for the long-term where it is considered that the liability will not reverse for some considerable time. (c) Prior to the implementation of HKAS 40, changes in the fair value of investment properties were recorded in the revaluation reserve rather than the statement of profit or loss. On sale, the revaluation gains were transferred from the revaluation reserve to the statement of profit or loss. (d) Prior to the implementation of HKAS 40, no depreciation was charged on investment properties occupied by the Group.

6 SWIRE PACIFIC 2014 ANNUAL REPORT 21 Valuation of Investment Properties HK$M 240, , , ,000 80,000 40,000 Gross Rental Income HK$M 12,000 10,000 8,000 6,000 4,000 2, Completed Under development office retail residential Mainland China USA and others PROPERTY INDUSTRY BACKGROUND Office and Retail Office Demand for office space was generally weak in 2014, particularly from financial institutions. Retail Demand for retail space in continued to be robust in 2014 although retail sales were affected by changes in the pattern of spending by tourists from Mainland China and by Occupy Central. Mainland China Office In Guangzhou, despite substantial new supply, rents were firm in 2014 on account of high occupancy. In Beijing, rents were firm in This reflected good demand for decentralised office space. Retail Overall, retail sales in Guangzhou and Beijing increased by 11% and 19% respectively. Sales of mid-priced products were strong and rents increased as limited space was available at prime locations. However, retailers of luxury goods were cautious about taking more space because of weak sales. Property Sales Markets In, there is demand for luxury residential properties, but there are not many transactions. In the USA, the residential property market in urban Miami was strong in RESULTS SUMMARY Attributable profit from the Property Division for the year was HK$7,786 million compared to HK$10,207 million in These figures include net property valuation gains, before deferred tax in Mainland China, of HK$3,134 million and HK$6,946 million in 2014 and 2013 respectively. Underlying profit, which principally adjusts for changes in the valuation of investment properties, increased by HK$750 million to HK$5,841 million. The increase in underlying profit principally reflects higher income from retail and office investment properties and higher trading profits from the sale of luxury residential properties in. Gross rental income was HK$10,320 million in 2014, an increase of 7% compared with There were positive rental reversions at the office and retail properties in. In Mainland China, there was higher rental income at TaiKoo Hui and Taikoo Li Sanlitun. Operating profit from property trading increased in 2014, principally because more units were sold at residential developments. Profits were also recognised on sales of units at Swire Properties 50%-owned DUNBAR PLACE residential joint venture development. There were better performances in 2014 from the hotels in and the UK. The hotels in Mainland China recorded reduced losses.

7 PERFORMANCE REVIEW AND OUTLOOK PROPERTY DIVISION Pacific Place is one of Hong Kong s premier shopping, dining and entertainment destinations. KEY CHANGES TO THE PROPERTY PORTFOLIO In January 2014, Swire Properties acquired 50% of DCH Commercial Centre, an office building with a gross floor area of approximately 389,000 square feet in Quarry Bay,. The building was renamed Berkshire House in July In January 2014, Swire Properties entered into a framework agreement with CITIC Real Estate Co., Ltd. and Dalian Port Real Estate Co., Ltd. signifying the parties intention to develop a mixed-use development comprising a retail complex and apartments in Dalian through a joint venture in which Swire Properties plans to hold a 50% interest. The proposed joint venture and development are subject to satisfaction of certain conditions precedent. In February 2014, Swire Properties completed the purchase of a 20% interest in Taikoo Li Sanlitun from GC Acquisitions VI Limited ( GCA ), a fund managed by Gaw Capital Partners, following the exercise of an option by GCA to sell its interest in Taikoo Li Sanlitun to Swire Properties. This transaction resulted in Taikoo Li Sanlitun becoming wholly-owned by Swire Properties. In February 2014, Swire Properties entered into an agreement with the Hong Kong Government to acquire the latter s interest in Cornwall House in Taikoo Place,. The transaction is expected to be completed on or before 30th December The acquisition allows Swire Properties to proceed with the redevelopment of three existing technocentres in Taikoo Place into two Grade A office buildings. In February 2014, the company which owns an industrial site at 8-10 Wong Chuk Hang Road in Aberdeen, Hong Kong (in which Swire Properties has a 50% interest) agreed with the Hong Kong Government to modify the relevant Government leases so as to permit the site to be used for commercial purposes. The site is intended to be developed into an office building with an aggregate gross floor area of approximately 382,500 square feet. In October 2014, Sino-Ocean Taikoo Li Chengdu, a shopping complex jointly developed with Sino-Ocean Land in Chengdu, Mainland China, started to open. The development consists of more than 1,226,000 square feet of gross floor area. INVESTMENT PROPERTIES Office Swire Properties completed office portfolio comprises 9.7 million square feet of space in, including 2.2 million square feet at Pacific Place in Admiralty, 1.6 million square feet at Cityplaza in Taikoo Shing and 5.5 million square feet at Taikoo Place in Quarry Bay. Swire Properties has office tenants in operating in different sectors. The top ten office tenants occupied approximately 23% of its office space in at 31st December Approximately 26% of its office space in is occupied by companies in the financial services sector. Gross rental income from the office portfolio for 2014 increased by 5% from 2013, to HK$5,355 million. The Hong Kong office portfolio performed well in Rental income grew as a result of positive reversions. Occupancy at most of the office portfolio was high. At 31st December 2014, the office portfolio was 97% let.

8 SWIRE PACIFIC 2014 ANNUAL REPORT 23 Pacific Place The offices at One, Two and Three Pacific Place performed reasonably well in The occupancy rate was 94% at 31st December Cityplaza Cityplaza One, Three and Four performed well in The occupancy rate was 100% at 31st December Taikoo Place There are seven office towers at Taikoo Place (including PCCW Tower, in which Swire Properties has a 50% interest). The occupancy rate (excluding One Island East) was 98% at 31st December One Island East, Swire Properties landmark property in Taikoo Place, had an occupancy rate of 98% at 31st December The remaining Techno Centres in Taikoo Place performed strongly in 2014 despite the fact that their redevelopment will start at the end of At 31st December 2014, the occupancy rate at Cornwall House and Warwick House was 100%. Others The remaining space at 28 Hennessy Road was leased in 2014 and the occupancy rate was 100% at 31st December The occupancy rate at Berkshire House in Quarry Bay at 31st December 2014 was 87%. Retail Swire Properties manages three retail malls in : The Mall at Pacific Place, comprising 0.7 million square feet; Cityplaza in Taikoo Shing, comprising 1.1 million square feet; and Citygate Outlets at Tung Chung, comprising 0.5 million square feet (on a 100% basis). The malls are wholly-owned by Swire Properties, except for Citygate Outlets, in which it has a 20% interest. There are other minor retail interests in. The retail portfolio s gross rental income for 2014 increased by 3% compared with 2013, to HK$2,705 million. This reflected positive rental reversions. The Group s wholly-owned malls were effectively fully let throughout the year. Retail sales at The Mall, Pacific Place fell by 6% in 2014, reflecting weaker spending by tourists from Mainland China and, in the last quarter, the effects of Occupy Central. Retail sales at Cityplaza were stable despite incidental disruption and shop closures during an enhancement project. Retail sales at Citygate Outlets were 5% higher in 2014 than in Residential The residential portfolio comprises Pacific Place Apartments, TAIKOO PLACE APARTMENTS, the luxury OPUS HONG KONG development (owned by Swire Pacific) and a small number of luxury houses and apartments. TAIKOO PLACE APARTMENTS is expected to open in the third quarter of The development comprises 111 serviced apartments with a gross floor area of approximately 63,000 square feet. Occupancy at Pacific Place Apartments was approximately 89% at 31st December There was good demand for fully furnished suites, particularly in the second half of Left Cityplaza underwent a HK$100 million refurbishment in 2014 in order to enhance the shopping experience. Right Berkshire House (formerly known as DCH Commercial Centre) is the latest addition to Swire Properties investment portfolio in Taikoo Place.

9 PERFORMANCE REVIEW AND OUTLOOK PROPERTY DIVISION Five units at OPUS HONG KONG had been leased at 31st December Two units were sold during the year. Investment Properties under Development The commercial site (Tung Chung Town Lot No. 11) adjacent to the Citygate Outlets is being developed into a multi-storey commercial building with a gross floor area of approximately 460,000 square feet. The development is expected to be completed in Swire Properties has a 20% interest in the development. The commercial site (New Kowloon Inland Lot No. 6312) at the junction of Wang Chiu Road and Lam Lee Street in Kowloon Bay is being developed into an office building with an aggregate gross floor area of approximately 555,000 square feet. Excavation and foundation works are proceeding. The development is expected to be completed in Somerset House in Taikoo Place has been demolished and will be redeveloped into a 50-storey office building with a gross floor area of approximately 1,020,000 square feet. The redevelopment is expected to be completed in The second phase of the Taikoo Place redevelopment (the redevelopment of Cornwall House and Warwick House into an office building) is being planned. The redevelopment will include a landscaped square of approximately 69,000 square feet. Building design is in progress at the 8-10 Wong Chuk Hang Road site. The development is expected to be completed in Swire Properties has a 50% interest in the development. Underlying Operating Profit HK$M 15,000 12,500 10,000 7,500 5,000 2,500 Completed Property Investment Portfolio Gross floor area ( 000 sq.ft.) 30,000 25,000 20,000 15,000 10,000 5, Property investment Property trading Hotels Completion Office Retail Residential Sale of investment properties Hotels Under planning Movement in Investment Properties Lease Expiry Profile at 31st December 2014 HK$Bn % of the total rental income attributable to the Group for the month ended 31st December st January 2014 Disposals Net valuation gain in, USA and others Translation difference Transfer to properties held for development Net valuation gain in Mainland China Capex Other net transfers 31st December and beyond Office Retail

10 SWIRE PACIFIC 2014 ANNUAL REPORT 25 Taikoo Li Sanlitun became wholly-owned by Swire Properties in February Mainland China Swire Properties owns and manages four developments in Mainland China. Taikoo Li Sanlitun comprises two neighbouring sites in the Chaoyang district of Beijing, Taikoo Li Sanlitun South (with 0.8 million square feet of retail space) and Taikoo Li Sanlitun North (with 0.5 million square feet of retail space). Taikoo Li Sanlitun South concentrates on contemporary fashion and lifestyle brands. Tenants at Taikoo Li Sanlitun North are principally retailers of international and local designer fashion brands. TaiKoo Hui is a mixed-use development in the Tianhe central business district of Guangzhou, with a total area of 3.8 milllion square feet. The development comprises a shopping mall, two Grade A office towers, a cultural centre (owned by a third party), a Mandarin Oriental hotel with serviced apartments and approximately 700 car parking spaces. INDIGO is a 1.9 million square foot mixeduse development at Jiangtai in the Chaoyang district of Beijing, comprising a retail mall, a Grade A office tower (ONE INDIGO) and EAST, Beijing, a 369-room hotel. Daci Temple is a retail-led mixed-use development in the Jinjiang District of Chengdu, with a total area of 2.9 million square feet. It consists of a retail complex (named Sino-Ocean Taikoo Li Chengdu), a boutique hotel (named The Temple House) with 100 guest rooms and 42 serviced apartments and a Grade A office tower (named Pinnacle One). The development will be accessible from the Chengdu metro. Retail The Mainland China retail portfolio s gross rental income for 2014 increased by 15% compared with 2013, to HK$1,555 million. The occupancy rate was 95% at Taikoo Li Sanlitun at 31st December Retail sales grew by 19%. The occupancy rate at TaiKoo Hui was 99% at 31st December Retail sales at the shopping mall increased by 11% in Retailers of 39 new brands became tenants, 21 of them opening shops for the first time in Guangzhou. Occupancy at the mall at INDIGO was 95% at 31st December 2014 and 93% of the shops were open. Retail sales increased by 66% in Sino-Ocean Taikoo Li Chengdu started to open on 31st October Gucci, Hermes, Muji, Fangsuo, Ole and Zara shops have opened. At 31st December 2014, tenants had committed (including by way of letters of intent) to take 83% of the space at the development. Office The Mainland China office portfolio s gross rental income for 2014 increased by 23% compared with 2013, to HK$331 million. The TaiKoo Hui and ONE INDIGO offices were 100% leased at 31st December 2014.

11 PERFORMANCE REVIEW AND OUTLOOK PROPERTY DIVISION Left Located in the Jinjiang District of Chengdu, Sino-Ocean Taikoo Li Chengdu started to open in October Right In 2014, Swire Properties began to sell units in Reach and Rise, the two luxury condominium towers within the Brickell City Centre development in Miami. Computer rendering of Brickell City Centre Investment Properties under Development Foundation work has been completed at the Dazhongli site in Shanghai. Work on the basement and above ground construction of the two office towers, one of the hotels and the shopping mall is in progress. The development is expected to open in phases from USA Brickell City Centre is a mixed-use development in the Brickell financial district of Miami, Florida. It has a site area of 504,000 square feet. Phase I of the development consists of a shopping centre, a hotel and serviced apartments (to be operated by EAST), two office buildings and two residential towers. At 31st December 2014, Swire Properties owned 100% of the office, hotel and residential portions and 86.5% of the retail portion of the development, with a 13.5% interest in the retail portion being owned by Bal Harbour Shops. Bal Harbour Shops has an option, exercisable from the fifth anniversary of the grand opening date of the retail portion of the development, to sell its interest to Swire Properties. The residential towers are being developed for sale. Construction work on Phase I commenced in 2012, with completion scheduled by the end of A light rail system station within the site is being renovated as part of the development. Phase II of the development is planned to consist of an 80-storey mixed-use tower comprising retail, office, hotel and residential space. The tower will utilise the site at 700 Brickell Avenue acquired by Swire Properties in July Development of this site will connect the Brickell City Centre development with Brickell Avenue. VALUATION OF INVESTMENT PROPERTIES The portfolio of investment properties was valued at 31st December 2014 (95% by value having been valued by DTZ Debenham Tie Leung) on the basis of open market value. The amount of this valuation, before associated deferred tax in Mainland China, was HK$220,634 million compared to HK$216,239 million at 31st December 2013 and HK$218,988 million at 30th June The change in the valuation of the investment property portfolio since 31st December 2013 principally reflects higher rental income at the retail malls in Hong Kong and Mainland China. Under HKAS 40, hotel properties are not accounted for as investment properties but are included within property, plant and equipment at cost less accumulated depreciation and any provision for impairment.

12 SWIRE PACIFIC 2014 ANNUAL REPORT 27 Audited Financial Information Investment Properties Completed Group Company Under Development Total Total HK$M HK$M HK$M HK$M At 1st January ,533 20, ,239 4,100 Translation differences (574) (24) (598) Additions 404 3,932 4, Disposals (853) (1) (854) (853) Transfer to properties held for development (146) (146) Transfer upon completion 1,270 (1,270) Other net transfers to property, plant and equipment (270) 11 (259) Other net transfers Fair value gains/(losses) 1, ,896 (46) 197,013 23, ,634 3,218 Add: Initial leasing costs At 31st December ,248 23, ,869 3,218 At 1st January ,991 12, ,273 4,396 Translation differences Additions 216 4,692 4,908 Disposals (96) (96) Transfer upon completion 1,238 (1,238) Transfer to redevelopment (5,494) 5,494 Other net transfers from property, plant and equipment (37) (335) (372) Fair value gains/(losses) 5,943 (98) 5,845 (296) 195,533 20, ,239 4,100 Add: Initial leasing costs At 31st December ,818 20, ,524 4,100 Geographical Analysis of Investment Properties Group Company HK$M HK$M HK$M HK$M Held in On medium-term leases (10 to 50 years) 29,785 29,349 On long-term leases (over 50 years) 162, ,795 3,218 4, , ,144 3,218 4,100 Held in Mainland China On medium-term leases (10 to 50 years) 25,077 24,439 Held in USA Freehold 3,237 1, , ,239 Notes: 1. The Group figures in the table above comprise investment properties owned by Swire Properties and a small number of properties owned by Swire Pacific which are managed by Swire Properties. The Company figures represent those investment properties owned directly by Swire Pacific. 2. Fair value gains on investment properties are recognised in the line item Change in fair value of investment properties on the face of the consolidated statement of profit or loss.

13 Queen s Road East PERFORMANCE REVIEW AND OUTLOOK PROPERTY DIVISION HONG KONG Taikoo Place Cityplaza Project Under Development approx. 1,020,000 sf PCCW Tower 620,148 sf Dorset House 609,540 sf Lincoln House 333,353 sf TAIKOO PLACE APARTMENTS 75,068 sf Island Eastern Corridor Oxford House 501,253 sf Berkshire House 388,838 sf One Island East 1,537,011 sf Cityplaza Three 447,714 sf Cityplaza Four Cityplaza One 556,431 sf 628,785 sf Tai Koo Station Tai Koo Shing Road King s Road Westlands Road Quarry Bay Station Devon House 803,452 sf Cambridge House 268,795 sf Warwick House 554,934 sf Cornwall House 338,582 sf Cityplaza EAST, (Shopping Mall) 199,633 sf 1,105,227 sf Pacific Place Three Pacific Place 627,657 sf Generali Tower 81,346 sf The Upper House 158,738 sf JW Marriott Hotel 525,904 sf One Pacific Place 863,266 sf Conrad Hotel 555,590 sf Island Shangri-La Hotel 605,728 sf Hennessy Road 28 Hennessy Road 145,390 sf Admiralty Station Three Pacific Place Link The Mall 711,182 sf Queensway Pacific Place Apartments 443,075 sf Two Pacific Place 695,510 sf Citygate One Citygate 160,522 sf Novotel Citygate 236,758 sf Project Under Development approx. 460,000 sf North Lantau Highway Tat Tung Road Tat Tung Road Note: These diagrams illustrate the major developments of Swire Properties. For details of other developments, please refer to the Schedule of Principal Group Properties on pages 235 to 243. Mei Tung Street Citygate Outlets 462,428 sf Tung Chung Station

14 SWIRE PACIFIC 2014 ANNUAL REPORT MAINLAND CHINA Taikoo Li Sanlitun Beijing TaiKoo Hui Guangzhou TaiKoo Hui Towers 1 & 2 1,731,766 sf Taikoo Li Sanlitun North 519,399 sf Mandarin Oriental, Guangzhou 584,184 sf Serviced Apartments 51,517 sf Taikoo Li Sanlitun South 776,909 sf Cultural Centre The Opposite House 169,463 sf Tia nh ee as tr oa d d oa nr tu i l n Sa Tianhe Road Shipaiqiao Station Indigo Beijing Shopping Mall 1,472,730 sf Daci Temple Project Chengdu EAST, Beijing 358,269 sf Pinnacle One 1,299,882 sf Sino-Ocean Taikoo Li Chengdu 1,226,870 sf ONE INDIGO 595,464 sf The Temple House (Hotel & Serviced Apartments) 334,793 sf oad isi R Dac Shopping Mall 939,493 sf oad iao R ianq Jiux et Stre gda Don Jiangtai Station Hon gxin g Ro ad Chunxi Road Station Projects Under DEVELOPMENT Dazhongli Project Shanghai, Mainland China Brickell City Centre Miami, Florida, USA Condominiums 1,134,000 sf Shopping Mall 490,000 sf Office 260,000 sf Hotels 527,307 sf Office Towers 1,851,408 sf Condominium Tower 520,000 sf Miami River g jin an t N ad es o W R Metrorail Brickell Station d oa ir iha e W Metro Station (under construction) SE 5th Str eet SE 6th Str eet 8th Str ee t th Sou EAST, Miami (Hotel & et re St 9th Shopping Mall 1,078,660 sf SW ue ven mi A Mia SW Shimenyi Road West Nanjing Road Station Miami River enue st Av SW 1 Serviced Apartments) 327,000 sf a Plaz kell Bric SE 7th Metromover Str ee Eighth Street Station t Future Development 1,300,000 sf 29

15 PERFORMANCE REVIEW AND OUTLOOK PROPERTY DIVISION HOTELS In 2014, Swire Properties hotels in Hong Kong performed well. Those in Mainland China were adversely affected by new hotels being opened and a drop in the number of international arrivals but still recorded reduced losses. There are three managed hotels under development, The Temple House in Chengdu, EAST hotel in Miami and a hotel at Dazhongli in Shanghai. The Temple House is the hotel portion of the Daci Temple project and is expected to open in the first half of EAST, Miami is part of Phase I of the Brickell City Centre development. This hotel is expected to open in the second half of The performance of the non-managed hotels in and the USA was stable in The Mandarin Oriental, Guangzhou, which opened in 2013, has established itself as a leading luxury hotel in Guangzhou. Occupancy and room rates increased in CAPITAL EXPENDITURE AND COMMITMENTS FOR INVESTMENT PROPERTIES AND HOTELS Capital expenditure in 2014 on Hong Kong investment properties and hotels, Completed Property Investment Portfolio Gross floor area ( 000 sq.ft.) 30,000 25,000 20,000 15,000 10,000 5, including the Group s share of the capital expenditure of joint venture companies, was HK$4,657 million (2013: HK$4,359 million). Outstanding capital commitments at 31st December 2014 were HK$17,497 million (31st December 2013: HK$20,291 million), including the Group s share of capital commitments of joint venture companies of HK$1,418 million. The Group is committed to funding HK$1,017 million of the capital commitments of joint venture companies in. Capital expenditure in 2014 on Mainland China investment properties and hotels, including the Group s share of the capital expenditure of joint venture Mainland China Others companies, was HK$2,272 million (2013: HK$1,500 million). Outstanding capital commitments at 31st December 2014 were HK$4,646 million (2013: HK$6,313 million), including the Group s share of the capital commitments of joint venture companies of HK$4,051 million (2013: HK$5,577 million). The Group is committed to funding HK$1,617 million (31st December 2013: HK$1,083 million) of the capital commitments of joint venture companies in Mainland China. Capital expenditure in 2014 on USA and other investment properties and hotels was HK$2,051 million (2013: HK$1,237 million). Outstanding capital commitments Profile of Capital Commitments for Investment Properties and Hotels Expenditure Forecast year of expenditure Commitments * and later At 31st Dec 2014 HK$M HK$M HK$M HK$M HK$M HK$M 4,657 1,564 4,122 4,030 7,781 17,497 Mainland China 2,272 1,955 1, ,646 USA and others 2,051 1, ,997 Total 8,980 5,226 6,032 4,274 8,608 24,140 * The capital commitments represent 100% of the Group s capital commitments of subsidiaries and the Group s share of the capital commitments of joint venture companies. The Group is committed to funding HK$2,634 million of the capital commitments of joint venture companies.

16 SWIRE PACIFIC 2014 ANNUAL REPORT 31 MOUNT PARKER RESIDENCES is a new residential development in Quarry Bay,. at 31st December 2014 were HK$1,997 million (2013: HK$2,850 million). Sustainable Development Energy intensity decreased by 3% in Energy inefficient air-conditioning and lighting was replaced by more energy efficient air-conditioning and lighting. Lost time injury rates decreased by 15% in There were fewer injuries in Hong Kong and Mainland China. PROPERTY TRADING Residential Developments in Mid-Levels West Swire Properties is the developer of four sites in Mid-Levels West, a residential district on Island. The AZURA development was completed in At 17th March 2015, 122 out of the 126 units had been sold. The profit from the sale of three units was recognised in Swire Properties has an 87.5% interest in this development. The ARGENTA development was completed in At 17th March 2015, 27 out of the 30 units had been sold. The profit from the sale of 15 units was recognised in ARGENTA is whollyowned by Swire Properties. Presales of units at the AREZZO development commenced in September 2014 and 79 of the 127 units had been presold at 17th March Superstructure work was completed and the occupation permit was issued in January Handover to purchasers is expected in the second quarter of The profit from the presold units is expected to be recognised in AREZZO is wholly-owned by Swire Properties. Superstructure work is in progress at 100 Caine Road (formerly known as 2 Castle Road) and the development is expected to be completed in 2016 and available for handover to purchasers in The development consists of a 50-storey tower of 197 residential units and 43 car parking spaces. The development is wholly-owned by Swire Properties. MOUNT PARKER RESIDENCES, Quarry Bay Swire Properties has an 80% interest in MOUNT PARKER RESIDENCES, a residential development in Quarry Bay. The development was completed in April 2014 and handover to purchasers commenced in May of the 92 units had been sold at 17th March The profit from the sale of 82 units was recognised in DUNBAR PLACE, Ho Man Tin DUNBAR PLACE is a residential development in Ho Man Tin, Kowloon. Swire Properties has a 50% interest in the development. The development was completed in December 2013 and handover to purchasers commenced in January of the 53 units had been sold at 17th March The profit from the sale of all of these units was recognised in South Lantau Road, Cheung Sha Two adjacent residential sites at Cheung Sha, on Lantau Island, are being developed into 28 detached houses. The development is expected to be completed and available for handover to purchasers in the second half of 2015.

17 PERFORMANCE REVIEW AND OUTLOOK PROPERTY DIVISION Audited Financial Information Property Trading Portfolio at Cost Group HK$M HK$M Properties held for development Freehold land Development cost Properties for sale Completed properties development costs 345 1,441 Completed properties freehold land 1 1 Completed properties leasehold land 171 1,247 Properties under development development costs 4,005 2,076 Freehold land under development for sale Leasehold land under development for sale 3,069 3,042 7,941 7,982 Mainland China Construction of the Grade A office tower at the Daci Temple project in Chengdu, named Pinnacle One, was completed in December Approximately 1,150,000 square feet (representing approximately 89% of the office s total gross floor area) and 350 car parking spaces were presold in August The tower is expected to be handed over and profits are expected to be recognised in USA The residential portion of Phase I of the Brickell City Centre development is being developed for trading purposes. There will be 780 units in two towers. Swire Properties started to sell units in Reach (the north tower) in June 2014 and units in Rise (the west tower) in November units in Reach and 65 units in Rise had been sold at 17th March of the buyers had unexpired statutory rights of rescission. The development is expected to be completed and available for handover to purchasers from late OUTLOOK Office and Retail Office Demand for office space, particularly from the financial sector, is likely to remain subdued. As a result, rents will be under pressure in the Central district of Hong Kong. Pacific Place, however, has no major leases expiring in 2015 and occupancy rates are expected to remain stable. At Taikoo Place and Cityplaza, rents are expected to remain resilient owing to high occupancy. Retail Demand for luxury goods in has weakened. But overall retail sales in are expected to grow modestly in Demand for retail space at prime locations and well-managed shopping malls is expected to remain high. Mainland China Retail In Guangzhou and Beijing, demand for luxury goods has weakened but that for mid-price products is expected to grow satisfactorily. Retailers are cautious about expanding. In Chengdu, the retail market is expected to grow steadily in 2015, reflecting demand from consumers for international and local branded goods.

18 SWIRE PACIFIC 2014 ANNUAL REPORT 33 Swire Properties aims to reduce electricity consumption by 52 million kwh per year by 2020 from a 2008 baseline. This represents approximately 20% of current energy consumption. In million kwh of electricity was saved. Office In Guangzhou and Beijing, office rents are expected to be under pressure in 2015 as a substantial supply of new office space becomes available. Hotels The performance of the hotels in Hong Kong is expected to be stable in Trading conditions for the hotels in Mainland China are expected to remain difficult because of oversupply. Property Trading In, there is demand for luxury residential properties but there are not many transactions. Profits from property trading are still expected to be significant in 2015, with the completion of the sale of pre-sold units in the AREZZO development, the sales of completed houses at the 160 South Lantau Road development and sales of remaining units at other completed residential developments. Mainland China Profits are expected on completion of the sale of the presold office tower (Pinnacle One) at the Daci Temple project in Chengdu in Mainland China. USA The residential property market in urban Miami was strong in While demand remains strong, there has been a marked increase in competitive supply since early Guy Bradley